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Diversified Opportunities Report

New York Community Bancorp, Inc.

Apr 14, 2022

NYCB:NYSE
Investment Type
Mid - Cap
Risk Level
Action
Rec. Price ($)

 

Company Overview: New York Community Bancorp, Inc. (NYSE: NYCB) is the holding company of New York Community Bank holding company, a New York-based state-chartered savings bank that operates 236 branches. Out of which 19 operate directly under Community Bank, the remaining 217 operate through eight divisional banks. It provides loan and deposit products and other related financial services to individuals and businesses.

NYCB Details

Key Takeaways from FY21 (ended December 31, 2021)

  • Improvement in Net Interest Income: The company reported a 17.18% increase in net interest income to USD 1.29 billion in FY21 (ended December 31, 2021) from USD 1.10 billion in FY20.
  • Growth in Net Income: The bank reported an increase in net income to USD 596 million in FY21 from USD 511 million in FY20.
  • Decline in Non-Performing Loans: NYCB reported a decrease in total non-performing loans to USD 33 million in FY21 vs. USD 38 million in FY20.
  • Robust NIM: NYCB's net interest margin (NIM) improved by 23 basis points (bps) to 2.47% for the twelve months ended December 31, 2021, from 2.24% for the twelve months ended December 31, 2020.

Revenue & Net Income Key Highlights; Analysis by Kalkine Group

Balance Sheet & Liquidity Position

  • Cashflow from Operations: Operating cash inflow in the quarter ended December 31, 2021, increased to USD 290 million from USD 75 million in the prior corresponding period.
  • Stable in Debt: NYCB reported total outstanding debt of USD 1,457 million at FY21 end, compared to USD 1,456 million at FY20 end.

Recent Developments

  • Launched Spanish Website: On March 18, 2022, TransPerfect, the world's largest language and technology solutions provider for global business, will launch the NYCB and My Banking Direct websites in Spanish. The new sites were built with TransPerfect's GlobalLink OneLink solution, which simplifies the process of designing, launching, and managing multilingual websites, to satisfy the growing service needs of the bank's Spanish-speaking customer base.
  • Quarterly Dividend: On February 22, 2022, NYCB announced the payment of a quarterly cash dividend of USD 15.94 per preferred share, or USD 0.3984 per depositary share, on its Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A. Each depositary share is worth 1/40th of a share of Series A preferred stock.

Key Metrics: In FY21, NYCB's Net Interest Margin and Loan Growth were 2.47% and 6.7%, higher than previous FY of 2.24% and 2.3%, respectively. Nonperforming Loans stood at 0.28%, 10 bps less than the FY21. Deposit growth was 8.1% as of FY21, higher than 2.5% on December 31, 2020.

Growth Metrics; Analysis by Kalkine Group

Top 10 Shareholders: The top 10 shareholders together form around 33.61% of the total shareholding, while the top 4 constitute the maximum holding. BlackRock Institutional Trust Company, N.A. and The Vanguard Group, Inc. hold the maximum stake in the company at 9.90% and 9.29%, respectively, as also highlighted in the chart below: 

Top 10 Shareholders; Analysis by Kalkine Group 

Risk Analysis

  • Product Concentration Risk: As of December 31, 2020, Multi-Family Loans and Commercial Real Estate (CRE) accounted for 76% and 15% of the NYCB’s total loan portfolio, respectively. These loans possess a higher risk of non-payment than one-to-four family residential mortgage loans. If these loans get impaired due to any reason, it may severely impact the company's financials.
  • Macro Headwinds: Inflation is currently rising, reducing buying power and allowing central banks to raise interest rates and drain liquidity. In the short to medium term, diminishing liquidity will put downward pressure on borrowing costs, posing a danger to bank profitability. Furthermore, unless the bank's performance improves, a lower Tier 1 Risk-Adjusted Capital ratio is a setback compared to the industry average.

Valuation Methodology: Price/Earnings Per Share Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: NYCB’s share price has corrected 28.19% over the past six months. The stock is currently leaning towards the lower band of its 52-week range of USD 9.86 to USD 14.33. We have valued the stock using the Price/Earnings multiple-based illustrative relative valuation method and arrived at a target price with an upside of mid-twenties (in percentage terms). We believe that the company can trade at a premium compared to its peer's average, considering its growth in loans and deposits, improvement in net interest income, and industry below nonperforming loans. We have taken peers like Customers Bancorp Inc (NYSE: CUBI.PRE) and Patrick Industries, Inc. (NYSE: WAL.PRA). Considering the solid financial performance, growth in Net interest margin, associated risks, and current valuation, we give a "Buy" recommendation on the stock at the current price of USD 9.91, up 0.15% as of April 13, 2022, 07:36 AM PDT.

NYCB Technical Chart, Data Source: REFINITIV 

Technical Indicators Defined

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.


Disclaimer-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

Kalkine Media LLC, an affiliate of Kalkine Equities LLC, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.